Other questions have been similar to mine but I'm still not clear. My former primary residence was purchased in 1978 and also used for small farming till about 1982 when it was abandoned for health reasons. We had always hoped to resume living there but that never happened. Thus it was not our primary residence when I sold it in 2019.
Due to it not being primary residence, it seems now to be treated as investment for tax purposes.
I purchased the property for about $38,000 in 1978. It sold for $129,000.
Turbo Tax instructions direct me to enter the amount of sale as an investment. When I do this the entire amount shows a taxable income.
Shouldn't the original purchase price, and improvements to the property be reduced from the taxable amount? If so, how/where to I do this?
Since we were forced to abandon the property for health reasons is there any allowance or deduction for categorizing it as an investment, since it was not income generating during its abandonment?
Yes, the purchase price along with any improvements made to the property would be part of the "basis" and subtracted from the amount of the gain that is considered income when you sell it.
When you enter this sale in the investment section of TurboTax you should be prompted to enter the cost of the investment as well. This is where you will enter the $38,000 - but be sure to add to this amount any additions or improvements that you may have made while you lived there or during the time that you used the land for farming.
Here is what the screen looks like -note in my example I used the $38,000 number but you may have a higher number if you made some improvements- such as new carpet, extensive landscaping, etc.